Aussie floods hit freight market, ship rates slide

The Baltic Exchange’s main sea freight index, which tracks rates to ship dry commodities, slid to its lowest in over 20 months on Tuesday as floods in Australia hit coal shipments.

The biggest floods in decades have wreaked havoc in Australia’s Queensland state, the country’s largest exporter of coal, shutting down coal mines and paralysing the transport of goods.

The index, which gauges the cost of shipping commodities including iron ore, cement, grain, coal and fertiliser, fell 4.5 per cent, or 80 points, to 1693 points and was at its lowest since April 17, 2009. Baltic freight data was last published on December 24.

“It’s a lack of coal availability. With such a large section of the market effectively taken out, that’s a big factor," said Peter Norfolk, research director at broker FIS.

The Baltic’s panamax index fell 2.55 per cent, with average daily earnings falling to $US14,312, their lowest since May 5, 2009. Panamax vessels usually transport 60,000-70,000 tonne cargoes of coal and grains.

“We expect freight rates in the Pacific to be under pressure due to limited demand as long as coal output is halted," Arctic Securities said.

Slower coal activity from Australia has also meant a wider differential between Pacific and Atlantic average daily earnings.

Earnings for panamax vessels travelling via the Baltic’s transpacific route fell to $US7613 a day on Tuesday, the lowest since April 2009. Earnings on the transatlantic route inched lower to $US20,065 a day.

Related Quotes

Company Profile

“Clearly all the demand action is focused on the Atlantic," said FIS’s Norfolk.

UNCERTAINITY

Analysts said the market was trying to gauge how long the weather-related ship disruptions in Australia could last.

Flood waters eased in its major coal mining region on Tuesday to allow some mines to slowly resume production, although most remain idle as the disaster affects some 200,000 people and force towns to be evacuated.

“The question is whether people believe there will long-term disruptions," said Georgi Slavov, head of dry research and structured products at ICAP Shipping.

“If it’s one to three weeks, this means that loadings will resume towards the end of January, and therefore they can start fixing vessels now."

Slavov said port congestion in Australia had risen, which could lend support to rates.

The Baltic’s main index has remained erratic since 2009 because of swings in Chinese demand for iron ore. Brokers said light iron ore activity had provided some support to capesize vessels, typically hauling 150,000 tonne cargoes such as iron ore and coal.

The Baltic’s capesize index fell 2.6 per cent on Tuesday, with average earnings slipping to $US18,697.